Here are some trade themes where we see value, as of April 30, 2017 (with a 1+ week delay):

Value on the Curve: (active CA trades):

  1. *** Look to buy cheap flies in the valley of the fly curve. Favorable roll, stimulus prospects and possible Fed stopping balance sheet reinvestments should keep these supported. Also look at some fly structures centered in the greens.
  2. *** Buy cheap crisis protection. A combination of market short positioning, increased Trump headline risk, and French election risk could cause a large rally.
  3. *** Look to establish long double fly positions at the back of the curve. The year double flies are back to the -2 level again.
  4. ** Look at calendar spread structures in the purples for roll. This is also great insurance against the 30 years from leading the puking, and 2000 mile walls aren’t cheap.
  5. ** EURIBOR: The reflation trade looks cheap there. I realize we are about to get turmoil. But a positive roll look at reflation seems attractive.
  6. ** Look for opportunities on the volatile 6mo fly curve. Some structures should move on a further rally but move less on a selloff.
  7. ** The June meeting looks high relative to the Sept meeting. The June meeting will underperform on a rally and the Sept meeting has more room to outperform on a selloff.
  8. * Buy ED 2018 meetings. Look at Q2 and beyond.

Value on the Horizon: (“C” trades):

  • * Look at cheap bearish tail trades. The curve is flat and the long end could really sell off.
  • * Some EU flies are starting to look high. We still have a lot of summer headlines to get through.
  • * At what point does the Fed start letting the Portfolio unwind? The answer seems to be after a “few hikes”, and this is becoming closer.
  • * If the Fed pauses to stop reinvestments, this could steepen the longer end of the curve. Spreads and flies could both benefit.
  • Look for cheap ways to play for two hikes through Q3. Yellen’s clock is ticking.

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